Bangkok is a vibrant economic hub and a popular investment destination in the heart of South East Asia. As a result, the city benefits from a solid rental market that is comprised of both Expat and Thai renters.
Property Professionals from Real Estate Agencies, Investment Consultancies and Residential Developers agree that Central Bangkok offers:
4-6% Achievable Gross Rental Yields
While this is a publicly published figure, it is often thrown around with very little context or insight into local market conditions.
This is the equivalent of equipping a foreign tourist with a city map, without explaining where that person is currently located. While the map is useful, without appropriate context it is unfortunately “unhelpful”; this is a paradox this article is hoping to address!
What Rental Yields are reasonably expected?
No investment is created equal and different condo buildings, areas and units will offer varying level of returns. Here is what is to be expected:
4- 4.5 % Yield
– This is generally considered low for Bangkok however as a general “rule of thumb” newly launched condos especially in prime locations (I.e. Phrom Phong, Asoke or Ploenchit) often offer Rental Yields on the lower-end of the spectrum. While this may seem unattractive, newly launched developments in CBD locations often benefit from higher and appealing Capital Appreciation returns!
– The majority of condos offer yields in this range; interestingly, the condos offering this return on investment can vary enormously in terms of condo location, type and even price range.
5.5- 6 % Yield
– Properties offering this level of rental yields are becoming increasingly rare. Investor should be careful, especially when pursuing an investment strategy of purely focusing on “maximizing” rental yields. In many cases Condos offering these returns have fundamental issues that are landlord, building or unit related. As the saying goes, “Caveat Emptor” (Let the buyer beware)…
Where are the best Rental Yields found?
Unfortunately there is no straight forward answer, especially in a huge city like Bangkok that offers hundreds of neighborhoods and condos. In the city, Rental Yields need to be evaluated on a Condo-by-Condo basis. It is also important to do some due-diligence and research into whether the neighborhood benefits from a good rental demand.
While there is rental market in every neighborhood in the Capital, it is important to note that demand levels and tenant demographics vary greatly between locations. Generally foreign investors are advised to consider only Central Business District locations and areas in close proximity notably:
– Sukhumvit (BTS Nana- On Nut)
– Silom- Sathorn (BTS Saladaeng- Surasak)
– Wireless-Ploenchit (BTS Ploenchit, Chidlom, Ratchadamri)
There are several other areas that benefit from strong rental demand, however the bulk of the market tends to cluster in these areas.
What Type of Condo Investment can I expect?
It’s always good to evaluate some real life examples, so here are a few different investments currently being marketed by Fresh Property that offer varying Rental Yields:
1. Keyne by Sansiri
Specs: 1 Bed/ 1 Bath/ 36 Sqm.
Sales Price: 8 MB
Rental Rate: Approx. 30-35,000 THB PCM
Expected Rental Yield: 4.5- 5.25 %
The price of the condo approx. 222,200 THB per/sqm, can generate a broad range of yields. It is important to note that this Condo offers a convenient lifestyle benefiting from stylish common areas and luxury facilities. On top of this the development is located in a chic neighborhood and only a few meters away from BTS Thonglor. Investor that would consider this property would tend to invest with a capital appreciation strategy in mind.
2. Villa Asoke
Specs: 1 Bed/ 1 Bath/ 41 Sqm.
Sales Price: 5.5 MB
Rental Rate: Approx. 20-25,000 THB PCM
Expected Rental Yield: 4.3- 5.45 %
A well-presented and charming Condo offered at approx. 134,000 THB per/sqm and offering a yield ranging between 4.3-5.43 %. The majority of condos tend to fit this profile; depending on the development and location, these units can be great medium/long-term investments, as they can perform on both a rental and capital appreciation basis.
3. The Trendy Condominium
Specs: Studio/ 1 Bath/ 36 Sqm.
Sales Price: 4.5 MB
Rental Rate: Approx. 18-23,000 THB PCM
Expected Rental Yield: 4.8- 6.1 %
Interestingly, Trendy Condominium is a fairly well managed condo with pleasant facilities (I.e. A large sunny pool and full-equipped gym). The building is also conveniently located only a 10 Minute walk from BTS Nana. However the sales prices of Units in this Condo have lagged behind, simply because the building struggles with an “image issue”.
Firstly it is located on Sukhumvit Soi 13, which is particularly narrow not making it pleasant for pedestrians. Secondly retail and commercial space is available in the Condo’s lower floors and in the past the building was populated by a multitude of massage and laundry shops. This is slowly starting to improve, especially with the arrival of VFS the official visa center for the UK!
How can I maximize Rental Yields in Bangkok?
The key to solid Rental Yields is a simple financial solution, buy better value condos that offers higher monthly rent. A few simple strategies include:
1. Select Low-Rise Condos
These types of residential developments are by default marketed at more competitive prices compared to their high-rise counterparts. This is because since they offer fewer units, they tend to be less advertised and benefit from less exposure. Developers of low-rise condos generally add less mark-up to their launch prices, as they need to remain competitive compared to high-rise developments in the neighborhood.
2. Consider “Older” Condos
A general rule of thumb is the older the condo, the higher the achievable yield. This is because older condos in Bangkok, tend to be sold at cheaper price per/sqm compared to newer launches. It is important to do careful due diligence when considering this strategy. Some older condos are badly maintained/managed resulting in extra maintenance costs or simply not popular rental options due to their dated environments.
3. Distressed or Urgent Sellers
This is every Rental Yield investor’s favorite buzzword and a typical search requirement we often receive:
“Looking for really discounted condos, where the seller is distressed”
While distressed or urgent sales are available, it is likely you will wait a LONG time before an opportunity arises. From personal experience, Landlords (Majority of which are Thai) tend to prefer offering their distressed assets to family and friends first. Landlords that do decide to contact agents do not stay on the market very long (Especially if the property is in a popular development).
Final Bangkok Rental Property Investment Advice
When property searching, it is important not to be too fixated on purchasing a Condo that can achieve maximum rental yields. Bangkok has a competitive Rental Market with a multitude of Condos for renters to choose from and “vacancy periods” can be a big issue.
Therefore equal attention must be paid to whether there is:
1. Solid rental demand for the Condo Project
2. Solid demand for the Neighborhood
Bangkok is a huge city full of property investment opportunities and savvy investors can profit through a combination of rental yields and capital appreciation profits!